Business, Management and Accounting
4 years ago

Inconsistent assumptions lead to vastly different equity value estimates.

2 views
Contemporary Accounting Research
Reconciling Value Estimates from the Discounted Cash Flow Model and the Residual Income Model*
Russell J. Lundholm, Terry O’Keefe

Paper Summary

The article explains why different methods give different estimates of a company's value. Both the discounted cash flow model and the residual income model should give the same value, but small errors in how they are used can lead to big differences in the estimates.

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